A blog on eminent domain, land-use, and related matters.

Monthly Archives: October 2007

It’s the oldest wheeze in the redevelopment game that the particular redelopment project du jour will revitalize the community, bringing prosperity, jobs, higher taxes and just about every other municipal goodie, with the possible exception of good sex (and, if you listen to the project’s promoters, maybe even that too). But what happens in reality? Apart from unintended redevelopment project failures, is the condemning agency obligated to live up to those plans? Actually, the answer is, “No.” Those plans need not be followed, so that after taking the land in question, the agency is free to do whatever it wants with it. It can devote it to uses that have nothing to do with those that were solemnly presented to the courts as the “public use’ justifying the taking. In fact, the agency can simply change its mind and sell the taken land for private uses. There is even case law allowing the agency to keep the land where it had no intention of devoting the taken land to the uses that were presented to the courts as the object of the taking.

Read all about it in an article that was just published in The Urban Lawyer, an ABA publication, See Gideon Kanner, We Don’t Have to Follow Any Stinkin’ Planning — Sorry About that, Justice Stevens, 39. Urban Lawyer 529, No. 3 (Summer 2007).

In addition to the data on the gap between condemnors’ offers and eminent domain trial results that we discussed in our earlier blog of October 13, 2007, we just dug up additional data on the deficiencies of condemnors’ offers to property owners whose land is being taken by eminent domain in California. The subject of revising California law governing fee shifting in eminent domain cases (see Calif. Code of Civil Procedure Sec. 1250.410 (b)) was considered but not carried through to completion, by the California Law Revision Commission in 1999, with results that pretty much replicate those in the other studies. The Commission relied on data collected by the Institute for Legislative Practice that examined the statistics on offers and verdicts in eminent domain cases tried in California between 1985 and 1999, using a sample of 237 cases, representing 20% of all contested eminent domain cases tried during that period of time. California Law Revision Commssion, First Supplement to Memorandum 99-66, Nov. 18, 1999.

The conclusion (in the Commission’s words): “The average jury verdict is about 41% higher than the plaintiff’s [condemnor’s] offer and the average bench verdict is about 33% above the plaintiff’s offer. [The 41% figure is identical to that found in the Utah study.]”

We have all heard war stories about sore losers. But it isn’t every day that you come across a vociferous sore winner. Allow us to introduce Marc B. Mihaly, an Associate Professor of Law at the Vermont Law School, and a former California pro-government paladin who takes out after Justice Stevens in a recent article in the Ecology Law Quarterly. He takes Stevens to task for the sin of failing to include in the Court’s majority opinion in the Kelo case some propaganda extolling the virtues of modern redevelopment. Talk about chutzpah!

As all readers of this blog must surely know, a couple of years ago the U.S. Supreme Court hit one out of the ballpark in favor of condemning agencies with its 5 to 4 decision in Kelo v. New London, allowing cities to take unoffending, privately-owned, lower middle-class homes and turn over their razed sites to private redevelopers so those worthies can build private profit-making malls and such, and presumably make lots of money, all in the hope that some of it will trickle down into the community. This is called “economic redevelopment” and it is supposed to increase municipal tax revenues and thus serve a “public purpose.” Of course, such talk can be no more than a triumph of hope over reality, and municipalities can lose their shirts on such deals, leaving the taxpayers holding the bag. Mihaly concedes, as he must, that “public entities rarely make money on those projects,” but that doesn’t stop them from snowing the courts with optimistic projections about conjectured financial wonders that redevelopment will surely bring to the condemnor-municipality. They can do that with impunity because the courts do not permit any inquiry into the truth of such matters — the condemnor’s decision to condemn, says the Supreme Court, is well-nigh conclusive.

As you also probably know, the Kelo decision got just about everybody, including those without a dog in this fight, thoroughly ticked off, and has brought upon the Supreme Court a tidal wave of public anger that has been unprecedented, at least in our lifetime. So you’d think that lawyers on the government side, the winning side, of this right-to-take controversy, people like Mihaly, would be pretty pleased with the court’s handiwork, though given the fierce public and legislative reaction around the country, the more astute among them might well worry that the court went too far.

But not Professor Mihaly. He is all bent out of shape because he thinks the U.S. Supreme Court’s majority didn’t go far enough. And what might Mihaly’s specific beef be? We’re glad you asked. It appears that Mihaly is sorely put out with the U.S. Supreme Court because Justice Stevens, the author of the majority opinion — are you ready? — said nothing about the “contribution of public-private economic redevelopment to modern American cities.” Not only that, by Mihaly’s lights Justice Stevens had the effrontery to limit himself to following what he deemed to be legal precedent in preference to his personal predilections of which Mihaly disapproves. What Justice Stevens should have done, says Mihaly, was to “articulate[] how the regime advocated by the dissents would do violence to the planning and contractual process that has recreated the modern American center city — a new land use regime that is the product of hard-won sophistication among city officials, regulators, and public and private redevelopment advocates.”

This is no place to get into a lengthy disquisition on the legal, social and economic failings of American redevelopment process that even at its best has historically exacted a high price, nor on the injustices inflicted by it on condemnees who are bulldozed out of the way of profit-seeking redevelopers without full and fair compensation for all their demonstrable economic losses, though we undoubtedly will touch on some of those things in future blogs.

In the meantime, here is a bit of advice to Mihaly: when a court bestows a doctrinal and economic bonanza upon you and your clients, it might be a good idea to say “thank you,” and failing that, just to keep quiet. Save your complaints for the times you lose, Marc, and we hope there will be many of those.

The 25th annual ALI-ABA program on Eminent Domain and Land Valuation Litigation will take place on January 3-5, 2008, at the Hotel Nikko in San Francisco. As usual, the program will feature presentations on law and updates on legal developments, as well as practical sessions directed to litigation techniques. This year’s featured keynote address will be delivered by Professor Richard Epstein of the University of Chicago, the author of the influential book TAKINGS.

Concurrently with this program, ALI-ABA wil offer a course of study entitled Condemnation 101: Fundamentals of Condemnation Law and Land Valuation. The latter program is aimed at practitioners who are new to the field of eminent domain, and in addition to its teaching component will enable newcomers to the field to meet and network with experienced practitioners from all over the country.

The ALI-ABA Eminent Domain course of study is a popular program that has been attended by practitioners as well as appraisers, for many years. It brings together counsel who represent both sides in eminent domain litigation and provides attendees with a broad perspective on eminent domain litigation and legal developments in this field.

For details of the program and to register, contact ALI-ABA, 4025 Chestnut St., Philadelphia, PA 19104, telephone 215 243-1600.

A few years ago the Wall Street Journal aptly characterized current state of eminent domain law as a “kleptocratic” process. That it is. All those who work in this field of law know that in the hands of judges the constitutionally promised “just compensation” can be a cruel joke. By definition, it excludes compensation for a variety of incidental economic losses suffered by property owners whose land is condemned, notably but not exclusively for businesses which in most cases can be destroyed without their owners receiving a nickel’s worth of compensation. Even the vaunted “fair market value” that the US Supreme Court has adopted as the standard of “just compensation” fails to compensate the condemnee-owners by definition. As the Court conceded: “just” compensation is not just but harsh, and that “In giving content to the just compensation requirement of the Fifth Amendment, this Court has sought to put the owner of condemned property ‘in as good a position pecuniarily as if his property had not been taken.'” Gee, that sounds pretty good, doesn’t it? But don’t get your hopes up; it all comes apart in the next sentence where the Court drops the other shoe and delivers its “however.” “However, this principle of indemnity has not been given its full and literal force.” United States v. 564.54 Acres, 441 U.S. 506, 510-511 (1979). Why not? The Court didn’t say. In other words, says the Court, you get indemnity for your condemnation-caused losses, except that you don’t. All you get is the supposedly “fair” market value. But do you? Not really.

Beginning in the 1960s, studies made of condemnation compensation practices have concluded that the condemnee-owners were actually undercompensated (“undercompensated” is a two-bit word for “cheated”). In a great many cases the government offers that are made are lowballs, often below the government’s own appraisal figures. How do we know it’s so? Because condemnation lawyers by and large charge their clients contingent fees with the contingency calculated only on the overage, not on the entire recovery like tort lawyers do. In other words, the owners don’t pay unless their lawyers demonstrate in court to a judge’s or jury’s satisfaction that the government’s valuation is too low. So if the government appraisals were fair or generous (as condemnor advocates like to say), those condemnation lawyers would starve to death. But they don’t. They do right well. How do they do it? Take it from us, they are not magicians able to bamboozle the judge or jury in the great majority of cases. Remember that jurors are taxpayers themselves. It follows that the typical government appraisal is deficient and its deficiencies can be demonsrtrated in court. That perception may strike you as conjecture, so we need to ask: are there any hard data to substantiate it. Actually, there are.

It began with the congressional hearings back in the 1960s, in which it became obvious that government agencies were shortchanging American property owners on a large scale. Government acquisition personnel were taking advantage of the fact that most owners lacked the funds and the sophistication to hire appraisers and specialized lawyers who understand eminent domain’s weird legal and appraisal rules, and know how to try those cases. It was routine then that the government offered the owners whose properties were in the path of public projects less than its own appraisers showed to be just compensation. This forced the owners either to accept the inadequate offers or to hire lawyers and appraisers just to get the compensation to which even the condemnor privately conceded they were entitled, thus losing even when they won because from their award the owners had to deduct the cost of litigation, thus never obtaining the full amount of the court award. And in eminent domain you don’t get general damages that you can use to pay your lawyers and experts and still keep your hard-core compensatory damages. Also, in eminent domain there is no collateral source rule which enables tort plaintiffs to collect more than once.

Responding to the manifest need to reform the law, the California Law Revision Commission was directed by the legislature to conduct a study of eminent domain law with the aim of protecting the interest of property owners. It found that there was widespread dissatisfaction with the state of eminent domain law. Its 1976 recommendations resulted in the enactment of the Eminent Domain Law (Cal.Code of Civil Procedure, Sec. 1230.010 et seq.) that corrected some of the worst injustices in California eminent domain law, but fell short of eliminating the undercompensation practices.

In 1967, two prestigious academics wrote an article in which they took a look at condemnation practices in Nassau County, New York. They found that the facts were every bit as bad and at times worse than the evidence revealed in those congressional hearings. Property owners were routinely being offered “compensation” that was less than the condemnor’s own appraisals. Curtis J. Berger and Patrick J. Rohan, The Nassau County Study: An Empirical Look Into the Practices of Condemnation, 67 Columbia Law Review 430 (1967).

There followed a number of other academic writings on the subject of “just” compensation, all agreeing that under what passes for eminent domain law, condemnees are routinely undercompensated. But hard data like Berger’s and Rohan’s have been hard to come by. Nonetheless, some investigative newspaper reporters looked from time to time into the realities of compensation in eminent domain and reached the same conclusions.

A 1999 study by the Salt Lake Tribune indicated that of the Utah property owners who rejected condemnor offers and insisted on valuation trials to establish their compensation, 80% recovered more in court than the condemnor’s offers, with the average increase averaging 40% over those offers. Ray Rivera, UDOT: Fair Deals or Land Grabs? Salt Lake Tribune, Oct. 24, 1999, at p. A1, Ray Rivera and Dan Harrie, UDOT Appraisals Lose in Court, Salt Lake Tribune, Oct. 24, 1999, at p. 1A.

Then there was the Minneapolis study by Dan Browning, MnDOT’s Tactics Squeeze Landowners, Minneapolis Star Tribune, Sep. 21, 2003, at page 1A. “The Star Tribune analyzed MnDOT’s computer records showing more than 1,200 cases since the late 1980s in which disagreements over land value were decided by court- appointed commissions. In two-thirds of those cases, the commission determined that property owners deserved at least 20% more money than MnDOT first offered. In a third of the cases, the award was at least double [MnDOT’s offer].” * * * “When Minnesota property owners refuse MnDOT’s purchase price, they can appeal to a commission appointed by the court to determine the value. These commissions often find MnDOT’s offers too low. Here are the results of 847 such cases decided from 1998 to 2003. MnDOT’s appraisals: $78.8 million. Amount paid or pending: $130.5 million.”

Now, yet another study has been made in Georgia by two professors of planning and business respectively, with similar results. Interestingly, these two gents are not condemnation lawyers and therefore don’t have a dog in this fight. See S. Alan Aycock, CPA, PhD, and Roy T. Black, PhD., J.D., Special Master Bias in Eminent Domain Cases (unpublished paper). The results of their study play a familiar tune. Undercompensation of condemnees is the norm in Georgia, even though the special masters usually award more than the condemnor’s offers. This is no place to go through the entire study which you can get by contacting Roy_black@bus.emory.edu , but its bottom line is that “condemnor appraisals are consistently lower than either the property owner appraisal or the final award.” Aycock and Black found that the average condemnor appraisal was $32,722, the special master award was $51,304, and the final [judicial] award was $177,758 (over five times the condemnor’s offer). The authors concede that this study was based on a small data base and they urge additional studies using a larger data base. But even so, these results are consistent with the results of earlier studies mentioned above. As those dead old Englishmen used to say, res ipsa loquitur — they speak for themselves.

An interesting item was buried on p. 24 of the Sunday, NY Times — an Associated Press Story entitled Alaska Seeks Alternative to Bridge Plan (NY Times, Sep. 23, 2007, at 26). It reports that Alaska has formally decided not to try building the infamous “bridge to nowhere” (actually, between Ketchican and Gravina Island that has 50 inhabitants). Though the “bridge to nowhere” that was to rival the Golden Gate bridge in size, is not about to be built, Alaska gets to keep the quarter of a billion or so that Congress had earlier earmarked for it and is free to spend it any way it wants. Wave bye-bye to your tax money.

The Gravina Island caper is only the latest such event in which gazillions of dollars in public funds have been wasted in the name of creating “public projects,” a process that at times only serves to transfer money from the federal Treasury to the politicians’ local states and districts. If you’re into championship amounts of wasted funds, Boston’s infamous “Big Dig,” an undergound urban freeway system takes the cake. It was originally estimated to cost $2.6 billion, but has so far gone through $14 billion and counting — it has so far produced a system of tunnels that leak and that in one instance suffered a collapse of the ceiling. Your tax money at work.

Here in California, we do our share too. In the 1970s the City of Los Angeles condemned some 17,500 acres in Northern Los Angeles County near Palmdale for a grandly named “Intercontinental” airport. It cost the city some $100 million, which is more like three or four times that amount in today’s dollars. But the “Intercontinental” airport was never built, though a number of small, short-hop local airlines have tried over the years to make a go of its rudimentary airport facilities, only to give up after a while. According to the Los Angeles Times, most of the acquired land has been leased to sheepherders and pistachio growers.

Why didn’t this airport work? Because the city built it in the desert far away from the population centers it was supposed to serve, whithout any mass transit that could efficiently transport the would-be passengers to it.

None of this is news. So why are we going on about it in this blog which centers on eminent domain? We’re glad you asked. The reason is that in condemnation cases, courts regularly refuse to provide genuinely “just” compensation for demonstrable economic — and at times uncontroverted — losses that condemnees suffer when their land is taken, but which the courts deem non-compensable because, as the California Supreme Court once absurdly conceded, it is the duty of courts to keep condemnation awards down or else — are you ready? — an “embargo” on the construction of public works will descend on us. Yes indeed, they said it. With what purports to be a straight face.

Bottom line: if the government has the money to fritter away on “public projects” that are either never built or are built but fail to generate the promised benefits, it surely has the money to provide full and fair compensation to people who are displaced from their homes, businesses and farms for those projects. The Constitution promises just compensation, not incomplete compensation, and the displaced owners are entitled to receive it. We don’t see any judicial lamentations about imminent bankruptcy when courts award huge amounts of damages in tort cases, and there is no reason why condemnees should be shortchanged when their homes and businesses are taken for public use.